Tata Steel - Q2FY23 Result Review - Profitability weak, downgrade to HOLD

Sep 13, 2026

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Tata Steel’s Q2FY23 profitability underperformed expectations, driven by weaker steel realizations and higher raw material costs, mainly coking coal. Despite India volumes rising 22% QoQ to 4.76 million tonnes, EBITDA per tonne fell 59% QoQ to Rs10,117, and European profitability deteriorated further. Consolidated net debt increased Rs202 bn QoQ to Rs717 bn due to the NINL acquisition, dividends and capex. The target price was revised to Rs105 from Rs112, and the rating downgraded to HOLD.

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Q2FY23 Result Review

Summary and rating decision

Key highlights and investment rationale

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Q2FY23 Result Review Tata Steel Profitability weak; Downgrade to HOLD HOLD Summary Tata Steel’s Q2FY23 profitability was below our expectations. Although India sales volumes grew by 22% QoQ to 4.76 mn tonnes, EBITDA/t fell by 59% QoQ to Rs10,117 due to fall in steel realization and higher raw material cost (mainly coking coal). European operations profitability was also hit by lower sales volume and weak realizations. EBITDA/t fell by 66% QoQ to Rs9,540 . Consolidated net debt increased by Rs202 bn QoQ to Rs717 bn led by acquisition of Nilanchal Ispat, dividend payout and capital expenditure. We cut our FY23 EBITDA estimate by 17% to factor lower than expected EBITDA reported in Q2FY23 but broadly maintain our estimates for FY24 . We revise our SOTP-based target price to Rs105 (earlier Rs112). The recent rise in stock price discounts the positives; hence, we downgrade the stock to a HOLD from a BUY. Key Highlights and Investment Rationale 􀂠 Projects update: During the quarter, company spent Rs190 bn towards the acquisition of Neelachal Ispat Nigam Ltd (NINL), dividend payout and re-line up of blast furnace in Netherland. The 6 mn tonnes pellet plant will be commissioned in 3QFY23 which will drive cost savings. This will be followed by the Cold Roll Mill complex of 5 MTPA. The NINL blast furnace was commenced in October 2022. Going ahead, company aims to increase its capacity to 10 mtpa from the current level of 1.1 mtpa. 􀂠 Weak performance by subsidiaries: Coking coal and energy cost were elevated during Q2FY23 . Thus, European EBITDA fell by 66% QoQ to Rs9,540 mn due to lower steel realizations and higher coking coal cost. Tata Steel Thailand’s EBITDA fell by 80% QoQ to Rs0 .3 bn (EBITDA/t of Rs1,005) . Tata Steel Long Products reported loss of Rs2 .2 bn at an EBITDA level due to lower sales volume and higher other expenses. TP Rs105 CMP Rs101 Potential upside/downside 4% Previous Rating BUY Price Performance (%) Absolute Rel to Sensex -1m -3m -12m 1.9 (6 .0) (23 . 1)(4 .5) (12 . 2) (26 . 2) V/s Consensus EBITDA (Rs bn) IDBI Capital Consensus % difference FY23E 371 424 (12.5) FY24E 418 386 8.3 Shareholding Pattern (%) Promoters FII DII Public 33.9 22.0 18.9 25.2 Novemebr 1, 2022 Tata Steel | Q2FY23 Result Review Exhibit 1: Quarterly Snapshot (Rs mn) | Financial snapshot | Q2FY23 | Q1FY23 | QoQ (%) | Q2FY22 | YoY (%) | | --- | --- | --- | --- | --- | --- | | Net Sales | 598,775 | 634,301 | (5.6) | 602,828 | (0.7) | | Total expenditure | 538,172 | 484,573 | 11.1 | 438,267 | 22.8 | | EBITDA | 60,603 | 149,728 | (59.5) | 164,561 | (63.2) | | EBITDA margin (%) | 10.1 | 23.6 | (1348bps) | 27.3 | (1718bps) | | Interest | 15,191 | 12,181 | 24.7 | 10,198 | 49.0 | | Depreciation | 23,478 | 22,368 | 5.0 | 22,889 | 2.6 | | PBT | 26,051 | 117,860 | (77.9) | 141,196 | (81.5) | | Tax | 13,081 | 41,923 | (68.8) | 15,719 | (16.8) | | PAT | 12,970 | 77,140 | (83.2) | 125,477 | (89.7) | | Diluted EPS | 1.1 | 6.3 | (83.2) | 10.3 | (89.7) | | Source: Company; IDBI Capital Research
Exhibit 2: Actual vs estimates | | | | | (Rs mn) | | | | | Q2FY23E | Q2FY23A | % Variance | | Net sales | | | 602,586 | 598,775 | (0.6) | | EBTIDA | | | 104,257 | 60,603 | (41.9) | | Margin (%) | | | 17.3 | 10.1 | (718bps) | | PAT | | | 77,140 | 12,970 | (83.2) | | Dil. EPS | | | 6.3 | 1.1 | (83.2) | Source: Company; IDBI Capital Research 2 Tata Steel | Q2FY23 Result Review | Exhibit 3: Geographical sales mix | Exhibit 4: Standalone EBIDTA/tonne fell by 59% flat QoQ | | | --- | --- | --- | | (mn tns)
8.00 7.00 6.00 5.00 4.00 3.00 2.00 1.00
0.00

Tata steel India Tata Steel Europe Tata Steel Long Products
Q2FY22
Q3FY22
Q4FY22
Q1FY23
Q2FY23 | (Rs/tonne) | | | | 35,000 30,000 25,000 20,000 15,000 10,000
5,000
- | | | Source: Company; IDBI Capital Research | Source: Company; IDBI Capital Research | | | Exhibit 5: Tata Steel Europe

FAQs

Why was Tata Steel’s profitability weak in Q2FY23?

Profitability declined due to falling steel realizations and higher raw material costs, mainly coking coal. European operations were also hit by lower sales volume and weak realizations.

How did India volumes and EBITDA per tonne change QoQ?

India sales volumes grew 22% QoQ to 4.76 million tonnes, but EBITDA per tonne fell 59% QoQ to Rs10,117 due to lower realization and higher input costs.

What factors led to the increase in consolidated net debt?

Net debt rose Rs202 bn QoQ to Rs717 bn, driven by the acquisition of Neelachal Ispat Nigam Ltd, dividend payout, and capex including blast furnace re-line up in the Netherlands.

Sep 13, 2026

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